Sales decreased by 20%
The direct effect of the rapid increase in prices by cigarette companies after the government increased the excise duty in the budget is now visible in the market data. In the months of April-May, there has been a huge decline of about 20 percent in the sales of big cigarette companies like ITC and Godfrey Phillips. A puff of cigarette has now become more expensive than ever for the consumer. Due to this increasing inflation, people are changing their brands, due to which the revenue of these FMCG companies is being directly affected.
Prices increased from pocket pack to king size
The pockets of cigarette lovers are now getting worse than before. According to the latest report of brokerage firm B&K Securities, companies have directly increased the prices of selected pocket pack brands. Godfrey Phillips has directly increased the price of its ‘Pocket Marlboro’ from Rs 70 to Rs 85. At the same time, ITC has increased the price of ‘Gold Flake Superstar’ from Rs 70 to Rs 79. The share of these products in the total sales of companies ranges from about 8 to 12 percent.
The real reason for the huge decline in sales
This slowdown in the market is actually the result of a major decision implemented by the government on February 1, 2026. The government had drastically increased the excise duty on cigarettes by 30-40 percent. The companies passed the burden of this additional tax on to the customers. According to a report by NDTV Profit, cigarette sales have decreased by about 20 percent in April. The biggest blow has been suffered by the ‘Premium King-Size’ category, where the sales graph has fallen the fastest.
Customers turning towards cheaper options
King-size cigarettes, including ITC’s ‘Classic’ or ‘Gold Flake Kings’ and Godfrey Phillips’ ‘Marlboro’, have now become quite expensive per cigarette. Earlier a cigarette was available for around Rs 20, now customers have to pay Rs 25 to Rs 28 for it. According to dealers, there has not been any significant decline in the total number of cigarette smokers, but to control their expenses, people are now leaving expensive brands and shifting towards cheaper options. This king-size segment contributes more than 30 percent to the total revenue of these companies, so this shift is a matter of great concern for the companies.
Danger looming over companies’ profits
This slowdown in sales is going to have a direct impact on the balance sheets of these FMCG giants. Analysts tracking the sector estimate that there could be a huge decline of up to 800 basis points in cigarette margins in the first quarter of FY 2027. However, it will entirely depend on how much the volumes decline and to what extent customers move towards cheaper brands. It is worth noting that ITC’s cigarette margin is usually as high as 70 percent. Despite this upheaval in the market, stability was seen in the shares of these companies in the stock market. Today on NSE, shares of Godfrey Phillips rose by Rs 49.10 (2.12%) to Rs 2,364.00, while shares of ITC were seen trading at Rs 311.35 with a marginal gain of Rs 1.20 (0.39%).
